First Look

May 30, 2017

Among the highlights included in new research papers, case studies, articles, and books released this week by Harvard Business School faculty:

Advice for those seeking advice

Executives on the rise are often told to seek advice from smart leaders. But there's a cost to asking for advice. A recent research paper finds that when advice is given, the advisor is not happy if it is not followed. “Across six studies, we find that advisors interpersonally penalize those who ignore their advice,” write researchers Hayley Blunden, Alison Wood Brooks, Leslie John, and Francesca Gino. Their working paper is titled, Seeker Beware: The Relational Costs of Ignoring Advice.

Should CEOs become social activists?

That question is asked in the new case study CEO Activism by Michael W. Toffel, Aaron Chatterji, and Julia Kelley. “The case uses several examples to describe why business leaders are engaging in CEO activism and the potential benefits and drawbacks,” according to the authors. (To learn more, read this related story from HBS Working Knowledge.)

What companies don’t know about location

A new collection of research papers explores how location can create value for firms. The book, which was co-edited by Juan Alcácer, Bruce Kogut, Catherine Thomas, and Bernard Yin Yeung, contains 11 chapters whose authors “draw on newly available data, recently developed theory, and diverse methodology to understand the relationships between firm boundaries, firm activities, and geographic borders.” The book is titled Geography, Location, and Strategy.

A complete list of new research and publications from Harvard Business School faculty follows.

Abstract—Changes in both technology and global political economy have vastly accelerated the pace of globalization in the last 40 years, eroding barriers that limited firms' geographic scope and unleashing a seemingly unlimited set of new threats, challenges, and opportunities to create value globally. Globalization presents managers with an environment to create value that is more complex, risky, and also more promising than ever before. Despite recent advances in our understanding of how locations impact the creation and appropriation of value by firms, the speed of these changes has often surpassed the speed of research on the connections between geography and firms. This volume draws together researchers working at the forefront of this area in a variety of disciplines—economics, geography, marketing, organizational behavior, psychology, sociology, and strategy—in order to explore the many ways that locations matter for firms. In eleven varied papers, the authors draw on newly available data, recently developed theory, and diverse methodology to understand the relationships between firm boundaries, firm activities, and geographic borders.

Abstract—Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and a falling number of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade of both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms. The survey focuses mainly on work related to developing countries.

Abstract—Prior advice research has focused on understanding when and why people rely on (or ignore) advice and how this impacts judgment accuracy; little is known about the interpersonal consequences of the advice-seeking process. In this paper, we investigate the interpersonal consequences of seeking out—then ignoring—advice from others. Across six studies, we find that advisors interpersonally penalize those who ignore their advice. This effect stems from both harsher perceptions of the advice seeker as well as a decrease in advisors’ sense of self-worth when their advice is not followed. Advice seekers fail to anticipate this negative relational impact, exposing them to unanticipated adverse consequences when they ignore the advice they receive. Moreover, these effects are compounded by advisor expertise: expert advisors are more likely to punish seekers who ignore their advice than are non-expert advisors. These findings challenge previous recommendations for optimal advice-seeking behavior.

Kate Wilson, retail analytics manager at Flashion, a fashion flash-sale site, is tasked with developing analytics to optimize pricing for first-exposure products on the site. Many in the industry have relied on years of experience and intuition to determine pricing—can Wilson provide new insights?

Korea Telecom (KT) has committed $4 billion in investments and R&D to build a GiGAtopia, essentially ushering in the next generation of mobile (5G) and wired infrastructure. CEO Dr. Chang-Gyu Hwang, and his team are considering which areas to prioritize in terms of new products and services in development. The top five sectors identified by KT’s team include the Internet of Things (including connected cars and smart city/homes), media, health, energy, and security and surveillance, which might provide some quick wins both in terms of revenues and market lead. Should KT develop solutions that could be exported to other countries? Should KT go all in across all five sectors, or select one or two to prioritize?

Interline Brands, a leading distributor of residential housing maintenance and repair parts and equipment in the U.S., had just held its November 2014 board meeting. The meeting had been productive but not without some soul searching for both the company’s management team and financial sponsors. Was now the right time to start a sale process? In particular, the team wondered whether the capital markets would cooperate and how effectively the management and sponsor teams would execute. Moreover, the company had only been private for two years, and the value creation plan was only halfway through completion. While there was much to be done at Interline, the company had performed well and was gaining momentum. Interline was a rare asset in terms of the scale it had reached. However, there were still unknowns. Would buyers reward Interline with a high valuation multiple that reflected its acceleration in organic growth? Would financing markets remain healthy? Would such a process disrupt Interline’s customers and employees?

This case introduces CEO activism, a phenomenon in which business leaders engage in political or social issues that do not relate directly to their companies. The case uses several examples to describe why business leaders are engaging in CEO activism and the potential benefits and drawbacks: (1) how Angie’s List’s CEO responded to the state of Indiana passing a controversial religious freedom law; (2) how Duke Energy’s CEO supported pending U.S. legislation addressing climate change, and (3) how Chobani Yogurt’s CEO publicly supported refugees. Students are then provided with the situation faced by PayPal CEO Dan Schulman after North Carolina passed House Bill 2, which Schulman perceived as discriminatory against LGBTQ (lesbian, gay, bisexual, transgender, and queer) individuals. Students are asked to consider whether Schulman should engage in CEO activism and, if so, how best to approach the situation. The (B) case provides an update on Schulman’s decision.